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Thursday, April 27, 2000

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Best foot forward


Accused of not really putting its might behind the brands it acquires, International Bestfoods is now busy extending niche brands such as Brown & Polson and Rex. Will the strategy work in a market where volumes speak loudest?

PURVITA CHATTERJEE

For a company whose growth strategy revolves around brand acquisitions, International Bestfoods Ltd (IBL) has always been accused of not adequately leveraging the brands it has acquired. The Indian subsidiary, satisfied until recently with being a niche player, made a dramatic entry into branded staples when it bought the Captain Cook brand from DCW last January. It has since been steadily increasing its portfolio _ either through more acquisitions (Tarla Dalal ready mixes) or through stretching the fra nchise of its existing niche brands.

Earlier known as Corn Products Company (CPC) and incorporated in 1931, the company dabbled in strong, although niche, brands such as Brown & Polson, Rex and Glucovita. Today, this Mumbai-based company boasts of a range of branded foods and staples that p op up readily in the well-stocked kitchen. With this, it has also taken on a new name that conveys a different image in the foods business, in the process getting rid of its niche associations.

Salil Punoose, Chairman & Managing Director, IBL reiterates: ``We are extremely strong in the ready-to-cook segment and that is our international strength as well.'' With ready-to-cook brands such as Tarla Dalal Ready Mixes, Knorr Chinese Mixes, Brown & Polson Custard, and Rex jellies and ice creams, IBL has established its presence in both the ethnic and Western food segments pretty thoroughly.

Now, it is in the process of extending its niche brands. For instance, the Brown & Polson brand, earlier stretched to cake mixes, is now being test-marketed for an instant orange drink powder _ Fresh Delite. A few months back, soon after Knorr had establ ished its dominance in the Rs 30-crore soup market, its equity was extended to Chinese mixes.

The question now is: Is it worth spending so much effort and money on these niche brands, especially in this country where it's volumes which help a company's bottomlines? In other words, should IBL rethink its strategy for growth?

Comments Nikhil Vora, Portfolio Advisor, Sharekhan.com: ``If the idea is to make money, it is always better to focus on mass market brands, since the niche brands have lived their lives. In spite of taking over Captain Cook, IBL has not been able to leve rage the brand through its marketing, distribution or even pricing strategy.''

The fact that the brand disappeared from shop shelves just after the takeover gave competitors just the leeway they needed to establish themselves. Infers a former manager of Captain Cook: ``I suspect that most of its funds got locked after acquiring the brand. Having spent so heavily on buying the brand, there were not enough funds left for any brand building.'' It has also been rumoured that the parent company took a long time to cough up the cash, which was what led to the brand disappearing from the market.

However, Punoose has a different story to tell. Blaming DCW with its cash flow problems for the lack of production, he claims the brand had in any case lost visibility in the marketplace. Says Punoose: ``When we took over the brand, its salt manufacturin g facilities and production was nil and we had to peak it. All this takes time, besides there is a due diligence exercise which is time consuming.'' While the salt was not seen in the market for almost eight months after the takeover, the atta (for which the production is sub-contracted) brand made an appearance in July last year, and is slowly establishing a national presence.

According to Anil Naik, CEO, Sudit Consultancy Services: ``The potential is huge in the salt market and heavy investments are required. Under such circumstances, aggression is important and the delay in relaunch without any additional features to differe ntiate the product is uncalled for.''

Its market shares are still lagging behind established players. Current ORG-MARG urban data on volume shares show Tata Salt at 17 per cent, Annapurna at 14 per cent and Captain Cook at 12.5 per cent. (The total salt market is estimated at Rs 500 crore wi th 20 per cent of it branded.)

Vora adds to the general scepticism about IBL's ability to sustain its new brands: ``IBL had a niche pedigree and also the potential of making it big in branded staples. But it could not leverage the Captain Cook brand, and even with its Tarla Dalal reci pes, it has yet to make any headway in the market. It still has a few products to cater to the Indian palate, but it must realise that it cannot be a success by selling Chinese sauces in India.''

The company, however, says it has kept the problem of catering to the Indian palate well in mind. For instance, it has plans to stretch Brown & Polson into offerings such as kulfi and certain Indian sweets as well as into mousses and ice cream mixes. As Punoose explains: ``We want this custard brand to stand for more products and are always trying to find out what Indians may like.'' There are also plans to stretch it into a full-fledged dessert brand, comprising both Indian and Western sweet dishes. Be sides, Skippy's Jelly Bites and the Soft Drink concentrate have also been brought under the Brown & Polson umbrella.

IBL's brands are undoubtedly strong ones. Brown & Polson is the market leader in, and almost synonymous with, the custard category; Rex straddles the jelly segment with a majority share, and now also has an ice cream mix and baking powder. A merger betwe en these two niche brands as they overlap in certain categories looks likely in future.

But, more important, it is time the company brought in some value addition to its mass products. This March, it relaunched Captain Cook atta as 100 per cent chakki ground. Considering competitor Pilsbury also positions its atta as chakki fresh, IBL's bra nd still lacks a distinct USP.

Punoose, however, defends this move: ``Atta does not need a particular USP and historically it has been proved that it is the chakki-made property that the brand has developed.'' But with both Levers and Marico having made value additions such as adding iron, IBL will probably look at a similar move. While Punoose says he is also looking at iron fortification, he believes it is more important for the atta to be chakki fresh.

In salt, Captain Cook is getting onto the iodine platform, something Annapurna also harps on in its commercial. Says Punoose: ``Our consumers already know about the free-flowing property of our salt. We have to now remind them that the salt also contains iodine, something which worries most consumers.'' There are also plans to introduce a premium variant in 200 g canister packs for both salt and pepper. DCW did have this pack, but in bigger grammage and only in salt.

What could help, however, both in atta and salt, are specific distinguishing value additions. As Naik points out: ``Captain Cook must take the value addition route by introducing specific varieties like salt for hypertension patients or a salt for kidne y disorders. It should not sound like a `me too' product.''

Meanwhile, FCB Ulka, the agency handling the brand, has broken a new commercial for Captain Cook salt, which highlights the loss of iodine while cooking. The TVC shows a child telling her parents that there is extra iodine in the brand.

Asserts Shashi Sinha, Executive Director, FCB Ulka: ``Captain Cook has a modern image. In the transition of changing owners, it has lost some momentum, but now we will make sure the brand is not left behind. We will continue with our initiatives to make the brand the best in terms of quality.''

The combined turnover from the three divisions _ Branded Foods, Staples and Caterplan (the food service arm) _ amounts to well over Rs 100 crore. Although it has yet to wipe out losses, it is the parent company _ Bestfoods USA, with 75 per cent equity _ that needs to make the necessary investment.

Punoose candidly admits: ``We are planning to make losses for the next few months. Now that we are interested in making a bigger entry into the Indian market, the parent company has to invest.''

The prayer, it would seem, has been heard. Investments are obviously trickling in, as revealed by the series of brand extensions. If this, combined with the extensive distribution network of some 1,400 dealers, is anything to go by, IBL should not find t he going too tough as it gets ready to make a greater impression on the market.

LOGGING ON

International Bestfoods Ltd is in the process of creating a local site to cater to its B2B business, apart from the international site it already has. Says Chairman Punoose: ``The use of the Internet is crucially important to us but retailing is still a distant possibility''. Therefore, while B2C operations in the food business may not be immediately feasible for IBL, networking among dealers is certainly on the cards.

From the 400 dealers who earlier stocked its niche brands, the number has expanded to 1,400 post the Captain Cook takeover.

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